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IMAX Looks to Heat Up With Summer Growth

The summer is a key time of year for the big-screen theater giant, and early signs are looking good.

The prospects for Hollywood entertainment have never been hotter, with many movie studios releasing new films from blockbuster franchises that should bring moviegoers flooding into theaters. IMAX (NYSE:IMAX) is looking to cash in on that trend, as its big-screen theater locations offer its viewers an unparalleled experience that helps earn a premium price over conventional theaters. IMAX expects to release its second-quarter results on Thursday morning, and with the quarter including the beginning of the key summer season, investors are hopeful that the company will cash in on new releases and produce blockbuster results of its own. Let's take a closer look at IMAX and what you should expect to see from the company both this week and well into the future.

Stats on IMAX

Analyst EPS Estimate

$0.40

Change From Year-Ago EPS

60%

Revenue Estimate

$100.2 million

Change From Year-Ago Revenue

27%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Can IMAX earnings keep getting brighter? Hollywood has been an exciting place lately, and investors have boosted their views on IMAX earnings as a result. In recent months, it's raised its expected second-quarter earnings by more than 10%, and IMAX is likely to produce better results for the full year as well. The stock has stayed on an upward track, rising 6% since mid-April but giving up some bigger gains from earlier this month.

IMAX's first-quarter results in April highlighted just how well the company can do even during seasonally slow times. Adjusted net income rose by more than half, with a 20% jump in global box office figures helping pave the way for faster growth from IMAX than most had expected. A combination of new theaters, system upgrades, favorable revenue-sharing arrangements, and production and digital remastering success all contributed to a solid set of quarterly results for the theater specialist.

Yet the beauty of the summer months is that IMAX typically gets access to a host of popular movies that bring more moviegoers in the door. This year's early hit is Jurassic World, which has quickly reached the $1 billion mark in total worldwide ticket sales. Even in its opening weekend, IMAX theaters showing the film brought in $44.2 million, a huge amount given that the company had fewer than 400 screens that offered Jurassic World to moviegoers.

Still, some investors are bearish on the theater industry, figuring that competition from at-home viewing options will continue to eat into ticket sales. Yet that's more of a concern for run-of-the-mill theater operators that offer only poor or average sound and video quality. Viewers who are willing to pay up for the IMAX experience already recognize the value of the cutting-edge audiovisual technology that IMAX provides, and in many ways, improving home-theater technology could help distinguish IMAX even more as the only theater worth leaving your home to visit in order to see a movie.

One item that caused IMAX's share price to fall recently was news that a couple of insiders sold out of some of their stakes in the big-screen theater company. CEO Greg Foster was one of them, and even though he sold just over 8% of his holdings in the company, it nevertheless prompted a brief double-digit percentage drop in the stock. Given the strong performance that IMAX shares have seen recently, though, brief pullbacks like this are likely no cause for alarm.

In the IMAX earnings report, a couple of key factors should be on your radar screen. First, be sure to see how well the company does in expanding in China, which has long been a hotbed of growth activity for IMAX. Second, listen for comments about the coming slate of new blockbuster films and how well IMAX plans to capitalize on them. With millions of moviegoers expected to return to theater seats in the coming year, IMAX needs to see the current environment as an unparalleled opportunity to grow even faster.

Author

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
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